Government contracts are designed to anticipate and address problems that might arise while contractors are performing their work.
However, there are some circumstances when a contractor might find the scope of its work changing in a way that merits additional compensation. In these cases, a request for equitable adjustment can be used to pursue a fairer price.
What Is A Request For Equitable Adjustment?
A request for equitable adjustment, or REA, is a proposal made by a contractor to its contracting officer seeking an equitable increase on the contract’s price based on a change to the requirements of the contract.
Any time contractors discover an unexpected problem that was not anticipated by the contract, they can negotiate with their contracting officer to find a solution that will allow them to receive an increase in the contract price for performing the new work.
An REA is considered a contractor’s first option when the parties are unable to reach an agreement, which usually occurs because the government believes the extra work has already been covered by the contract.
In a request for equitable adjustment, the contractor explains why it believes that the work is not covered by the contract. If the contracting officer agrees, both parties then enter a new contract modification. However, if the contracting officer disagrees, the next course of action is to submit a certified claim that could lead to litigation.
Should A Contractor File A Request For Equitable Adjustment Or A Claim?
When a contractor has a good working relationship with its contracting officer, an REA has a better chance of being successful. It is also the appropriate move when the agency has indicated a willingness to negotiate a change or dispute with the contractor.
However, if the contractor and the contracting officer have an adversarial relationship or it is clear that the contracting officer is not amenable to negotiating the change or dispute, filing a claim may be the better path. Likewise, if the government has already stated it does not believe a contractor is entitled to an equitable adjustment, a claim should be filed instead.
An REA can also be converted into a claim later if necessary. It is important to note that filing an REA does not preclude a contractor from filing a claim later. Many contractors end up filing both a claim and an REA.
Tips For A Successful Request For Equitable Adjustment
Although there is no specific required format, a request for equitable adjustment typically takes the form of a letter written to the contracting officer.
Outlined below is a look at what goes into a successful request for equitable adjustment. Of course, the specifics vary depending on the contractor’s situation.
Detail What Happened
It is essential to detail what the government did or failed to do under the relevant contract clause to cause the higher costs or delay. Be sure to explain the relationship between the cause and effect of the government’s inaction or action and why the delay affected the completion of the project. Include a description of the scope of the work under the contract and all the documentation and correspondence demonstrating the contract requirements.
Include Supporting Documents
A strong REA will include exhibits or attachments that support the statements it makes. For example, emails showing that the contracting officer told the contractor to carry out additional work can be used to back up the claims made in the REA. This is especially helpful in cases where the issue has been ongoing and multiple individuals were involved.
Review The Releases
Many contract modifications include releases which sometimes prevent contractors from recovering on REAs. Be sure to review contract modifications before signing them; get help from government contracting consultants or other counsel if you have any doubts.
Get The Timing Right
Contractors should submit their request for equitable adjustment within 30 days of the change that creates the need for the REA. An REA may not be submitted after the contract has closed.
Track The Time You Spend
Keep track of the time you spend preparing your request for equitable adjustment. Because these costs are considered contract administration costs, it may be possible for you to recover this as part of the REA.
Track Legal Fees
If you choose to enlist the services of a lawyer for the REA process, keep all documentation related to the fees becasue they may be recoverable.
FAR 31.205-33 specifies that if contractors incur legal costs in preparing an REA to further negotiation with the agency, these costs can be considered allowable contract administration costs.
Get It Certified If Required
Although requests for equitable adjustment do not generally need to be certified, those related to Department of Defense contracts with a value exceeding $150,000 do require certification.
Work With Government Contract Consultants Today
For guidance on all matters related to requests for equitable adjustments, get in touch with the government contract consultants at Diener & Associates. Our experienced certified public accountants can help ensure that you are being compensated fairly for the work you do and help you remain fully compliant with relevant regulations.